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Does monetary policy stabilize the exchange rate following a currency crisis? Author info | Abstract | Publisher info | Download info | Related research | Statistics Ilan Goldfajn () (Department of Economics PUC-Rio)
Poonam Gupta ()
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This paper provides evidence on the relationship between monetary policy and the exchange rate in the aftermath of currency crises. It analyzes a large data set of currency crises in 80 countries in the period 1980 to 1998. The main question addressed is: can monetary policy significantly alter the probability of reversing the post-crisis undervaluation through nominal appreciation rather than higher inflation? We find that tight monetary policy facilitates the reversal of currency undervaluation through nominal appreciation rather than inflation. When the economy is also facing a banking crisis, depending on the specification, tight monetary policy may not have the same effect.
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Paper provided by Department of Economics PUC-Rio (Brazil) in its series Textos para discussão with number
396.
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Length: 32 pages
Date of creation: Feb 1999Date of revision:
Handle: RePEc:rio:texdis:396Contact details of provider: Postal: Rua Marqu�s de S�o Vicente, 225, 22453-900 Rio de Janeiro, RJ Phone: 021 35271078 Fax: 021 35271084 Web page: http://www.econ.puc-rio.br More information through EDIRC
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Find related papers by JEL classification: E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization
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